Gold moved lower on Tuesday as rising U.S. Treasury yields and higher crude prices coincided with increased expectations that the Federal Reserve could raise interest rates at its September meeting.
At 04:46 ET (08:46 GMT), XAU/USD declined 1.6% to $4,377.84 an ounce, while gold futures fell 1.2% to $4,426.26. XAG/USD was down 2.4% at $64.98 an ounce and XPT/USD declined 1.2% to $1,774.70.
The U.S. Dollar Index increased 0.2% to 99.59.
September Fed rate expectations increase
Gold has fallen approximately $320 from last week’s peak near $4,697. The decline has occurred alongside increases in oil prices and government bond yields.
On Friday, gold dropped more than 3% after Federal Reserve Chair Kevin Warsh reiterated the central bank’s focus on returning inflation to its 2% target.
CME FedWatch indicated that markets were assigning around a 66% probability to a 25-basis-point rate increase at the Fed’s September meeting, up from approximately 40% before Warsh’s Jackson Hole address.
Oil prices have meanwhile moved higher following renewed military exchanges between the United States and Iran. Brent crude rose above $91 per barrel and U.S. crude traded above $86 as markets considered potential risks to energy supplies.
The benchmark 10-year U.S. Treasury yield increased to around 4.78%, its highest level since early 2025, as government bond yields also rose across major global markets.
Tony Sycamore, senior market analyst at IG, linked the approximately $300 decline in gold from last week’s high to Warsh’s more hawkish Jackson Hole comments and renewed tensions around the Strait of Hormuz.
Sycamore said the combination of higher oil prices and rising bond yields had increased pressure on gold ahead of the Federal Reserve’s next meeting. He estimated that markets were pricing around 60 basis points of rate increases through June 2027.
August rally remains part of gold’s broader performance
The latest decline follows a gain of nearly 10% for gold during August, when the U.S. Treasury unexpectedly increased purchases of longer-dated government debt.
Those purchases contributed to lower borrowing costs and a weaker dollar. Concerns about the level of U.S. government debt and the possibility of currency devaluation were also among the factors influencing demand for the precious metal.
The debasement trade was one factor behind gold’s approximately 65% increase in 2025, as investors sought assets considered potential hedges against expanding government deficits and weaker currencies.
Gold-backed exchange-traded funds recorded inflows, while central bank purchases also contributed to demand.
Employment reports could provide further signals for Fed policy
Gold continued to trade below its 200-day moving average, which stood near $4,526, after moving beneath the technical level following Warsh’s speech.
Sycamore said the decline had not changed his medium-term view that gold established a base around the late-June low near $3,942. He continues to favour purchases during pullbacks and maintains a longer-term upside target of $5,000.
Market attention will turn to job openings data, the ADP employment report and Friday’s nonfarm payrolls figures for additional information on U.S. labour market conditions ahead of the Federal Reserve’s September policy meeting.
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